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Brafman, Lester R
Friday, July 27, 2007 7:38AM
Lehman, David A.
FW: Collateral calls
Brafman, Lester R
Friday, July 27, 2007 7:34AM
Sundaram, Ram; Mullen, Donald; Salame, Pablo; Roberts, William
RE: Collateral calls
Sounds like the marl<s that are stale are marks that the desk does not have risk on and are provided to customers on
a Monthly vs daily basis. If that is the case their should be no surprise that they are off that much at the end of the
month. This is not the only product that provides month end marks vs daily marks, which given the moves this
month may be a problem across many desks. I will look into it.
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Sundaram, Ram
Thursday, July 26, 2007 11:09 PM
Mullen, Donald; Salame, Pablo; Brafman, Lester R; Roberts, William
Collateral calls
As you are aware, PFI has been dedicating resources to ensure accuracy in the marks being utilized on all
existing trades in the -ve basis book. After witnessing the market sell-off over the past several weeks, it became
clear that the marks we are receiving from dealers and our own trading desk are not tracking the market, but
instead are either model-based or stale. After spending the past two days chasing dealers and internal desks for
fresh marks, the result has been the need to call a significant amount of collateral from various counterparties.
This is particularly concerning in that these stale marks were also being sent to clients by GS for their own
valuation purposes (for example- west coast bonds were quoted at99 yesterday by the GS trading desk and after
we demanded a current bid, they were bid at 77.5 today). The extent of the collateral calls being generated
overnight is embarrassing for the firm ($1.9Bn from AIG-FP alone). We need to focus on developing a process
for ensuring accuracy for all marks, especially those which are being sent to clients and those that are the basis
for margining open transactions. Would be happy to share with you the methodology we used today to mark the
ABS COOs. which keys off of observable proxies like TABX and ABX and could be used as a better marketsensitive monitor to mark these bonds.
Thanks,
Ram
Confidential Treatment Requested by Goldman Sachs
GS MBS-E-011167792
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